ES Risks and Shareholder Voice

Abstract

Over the 2004 – 2016 period over 20% of all shareholder proposals relate to environmental and social (ES) issues, and slightly more than half are sponsored by asset management companies. Support for these proposals has increased substantially over this period, but it remains the case that virtually none receive the minimum threshold support rate to pass. We find that failed ES proposals with higher investor support significantly predict future firm risk, measured in extreme negative stock returns and real events such as negative ES incidents. Examining the detailed records of mutual fund votes, we uncover that myopia within investors and management contributes to these proposals not receiving greater support.

Keywords: shareholder proposals, voting, mutual funds, environmental, social